IDEAS home Printed from
   My bibliography  Save this paper

Differential Interest Rates on Unbalanced Growth Paths


  • Martin Diedrich

    () (Department of Economics Keele University)


The paper studies an unbalanced multisectoral growth path in which cost-minimizing producers are subjected to a system of differential interest rates. We ask whether such differentials in capital charges are compatible with the existence of competitive equilibrium. In Part I, we study the price-quantity equilibrium for given final demand and a given level of interest rates. We find that existence is ensured if interest-rate differentials are "in tune" with physical productivity differentials. Our proof is constructive; we show that an equilibrium solution can be computed by applying Lemke's complementary pivoting algorithm to the data of the problem. In Part II, we study how the level of interest rates and the level and structure of final demand adjust to changes in activity levels, prices and income. We find that the interest-rate differentials from Part I do not prevent the required equilibrium adjustments. This confirms our principal insight from Part I, namely that interest rate differentials are consistent with equilibrium as long as they are in tune with productivity differentials.

Suggested Citation

  • Martin Diedrich, 2000. "Differential Interest Rates on Unbalanced Growth Paths," Keele Department of Economics Discussion Papers (1995-2001) 2000/13, Department of Economics, Keele University.
  • Handle: RePEc:kee:keeldp:2000/13

    Download full text from publisher

    File URL:
    Download Restriction: no

    More about this item


    Multisectoral Growth Theory; Linear Complementarity Theory; Computational Equilibria; Capital Theory; Traverse Analysis;

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kee:keeldp:2000/13. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Martin E. Diedrich). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.